FHA Refinance to Conventional

[Anonymous]

Bought a house 14 months ago, and because we didn't have 10% to put down, we had to go FHA. The houses in our neighborhood have really increased in value over the past year, and we think we actually now have 20% equity.

We'd like to refinance out of the FHA into a conventional loan. Assuming that we have 20% equity, I am wondering how easy it is to refinance out of FHA. We have high scores (800's), negligble debt (right now, total DTI incl mortgage + PMI is 28%, so it would be even better without PMI.)

What I am wondering is how willing are lenders to refinance out of an FHA loan into a conventional. Is it just another day at the office, or are they looking for higher standards (such as even more equity in the home) in order to agree to refinance out of the FHA.

[jefftca925]

I know this is an older thread (BUMP!) but I'm looking at doing the same thing.  The value on my property has dramatically increased since I bought it in July 2011... purchased for $155k and recent sales for the same floor plan (PUD condo) are going for >$220k.  Have spoken to a couple of banks regarding this and they didn't flinch at the idea of refinancing an FHA into a Conventional loan.  I'm considering going thru US Bank since they have the loan package I like and I can setup a home equity line to do some remodeling.  Anyone have any recent experiences with this?

[JM-AM]

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@jefftca925 wrote:

I know this is an older thread (BUMP!) but I'm looking at doing the same thing.  The value on my property has dramatically increased since I bought it in July 2011... purchased for $155k and recent sales for the same floor plan (PUD condo) are going for >$220k.  Have spoken to a couple of banks regarding this and they didn't flinch at the idea of refinancing an FHA into a Conventional loan.  I'm considering going thru US Bank since they have the loan package I like and I can setup a home equity line to do some remodeling.  Anyone have any recent experiences with this?

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Nothing wrong with refinancing to a Conventional Loan from FHA.

The biggest set back I run into when changing the type of loan is the out of pocket cost. Most want to refinance with-out spending any money, so they end up doing a streamline.

You really have to figure out the numbers and your peticular situation.

How long do you plan on staying in the home?

How long have you lived in the home already?

How much monthly MIP you are paying for FHA?

How long before you will reach the 78% LTV to have MIP removed?

How are your Credit Scores?

How is your employment (W2 or Self Employed)?

Your Income?

What is your present DTI (FHA allows higher DTI)?

What Rate are you at now with FHA and what rate would you be at going Conventional?

Are you wanting a Cash-Out Refinance or No Cash-Out Refinance?

This is just a start of questions to answer, to determine if it is best for you.

[jefftca925]

How long do you plan on staying in the home?   Probably for a few years and then convert it to a rental

How long have you lived in the home already?   1.5 years

How much monthly MIP you are paying for FHA?   about $141 a month

How long before you will reach the 78% LTV to have MIP removed?   I would guess another 4 years

How are your Credit Scores?    770-790 (depending on which report you run)

How is your employment (W2 or Self Employed)?   employed 5 years at the same job

Your Income?   $60k+

What is your present DTI (FHA allows higher DTI)?   about 22%

What Rate are you at now with FHA and what rate would you be at going Conventional?   4.625% 30-year FHA convert to a 3.5% 15-year Conventional

Are you wanting a Cash-Out Refinance or No Cash-Out Refinance?   Cash out about $20k (seperate Equity Line)

The bank is offering a "no-cost" refinancing option because of my mortgage balance.  I realize the interest rate is about .25% or so higher because I'm not putting any $$ into the refi but that's ok.  I'd like to have the write-off.  This will also have my place paid off in half the time at about the same payment I'm paying currently which is my goal.

[JM-AM]

If all that is stated is correct you are a good candidate for the Refi.

Since you are okay with a slightly higher rate so not to have out of pocket expenses, I personally would shop that number. I think you can still do just a little better on a 15 year.

[jefftca925]

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@JM-AM wrote:

If all that is stated is correct you are a good candidate for the Refi.

Since you are okay with a slightly higher rate so not to have out of pocket expenses, I personally would shop that number. I think you can still do just a little better on a 15 year.

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The rate I put here is only a "quote" but not from a GFE.   When I get that I'll have more exact info to work with and be able to shop around if I need to.  There are some other services that the bank will give me for free if I do the re-fi with them as well... something else to consider.  Thanks to all for your input!